I THINK MINING

“I would also encourage increased sharing of objective information concerning the ore body, and a progress report on the steps necessary to realize the dreams of both Mr. Stanfield and his investors.”

Thus end a report by David Baines of the Vancouver Sun in writing about the court decision regarding an attempt by unhappy investors to oust the chairman of a mining company that has bilk them of millions and never paid a dividend.   Asecond, brilliant report, also by David Baines is at this link.

The story is long and convoluted.  It is a story, as the judge notes, of dreams of riches never realized.  It is a story that should be read by all who are tempted to invest in mining without doing their homework. 

I tell the story and comment at this link.   You can read the outcome at in the report linked to above.  In brief, over many years, many foolish investors put money into a promised mine that has never came to fruition.  The investors got impatient and sued to remove the chairman.  The judge decided that the investors are dreamers, dreaming of riches, who should realize that it takes many years to develop a mine, and that some prospective mines never come to fruition.   

The judge decided that Ross Stanfield, Chairman and autocratic ruler of the mining company so believed in his mine that he could not be called a fraud. 

Leask [the judge] said the companies never mentioned a production schedule in their offering documents or subscription agreements, and the petitioners admitted they knew the investment was speculative and there was no guarantee the mine would ever be brought into production.

The judge also noted that, despite the delays, some of the petitioners continued to buy shares and sign extension agreements. One petitioner even said he was willing to wait until he was “old and grey if necessary.”

“I am satisfied that, if some or all of the petitioners had an expectation that the mine was going to be brought into production ‘soon’ or ‘within a reasonable period of time’ that expectation was not a reasonable one,” Leask said in his decision.

“The petitioners all realized, or should have realized, that their investments in the corporate respondents were highly speculative. They all believed there was an ‘ore body’ which the corporate respondents intended to mine. The larger the ore body is, or is believed to be, the more expensive and time consuming the process of bringing it into production will necessarily be.”

Thus the lesson learnt:  buy shares in prospective mines, but caveat emptor.  In partiular, stay away from Stanfield who is now free to sell more shares on the basis of fiction and dream—for he is not constrained by fact or action.

PS 4 March 2010:  Here is a link to a recent announcement by David Baines of the Vancouver Sun that the unhppy shareholders are trying to get back in court.  Part of the reprot reads:

However, in one of the great did-he-really-say-that judicial pronouncements of all time, Leask ruled that if the petitioners had an expectation that the mine was going to be brought into production “within a reasonable period of time, that expectation was not a reasonable one.”

We can only hope the appeal court recognizes that the dissidents — who claim to have the support of 400 other shareholders — are being abused and deserve relief as provided under minority shareholder oppression provisions in the B.C. Company Act.